4 Self-Defeating Money Moves -- and What You Should Do Instead

Are you really improving your finances, or are you just spinning your wheels?

It's always admirable to work on your financial situation. Saving money, increasing your income, and earning more back on your spending are all smart goals that can pay off in the future.

The problem is that we consumers frequently don't find the most efficient ways to accomplish those goals. We make financial decisions that seem productive but turn out to be more trouble than they're worth.

To avoid falling into these traps, here are the most common counterproductive money moves, along with their more useful alternatives.

1. Chasing the highest savings account interest rates

I like to call this the savings account shuffle, and it's especially common when banks cut their interest rates or when one bank debuts a new account offering a higher interest rate than the rest. Consumers decide they should move their money because a different savings account now earns 0.05% more than they're currently getting.

It's hard to argue against more interest, but let's do the math for what kind of difference 0.05% makes. On a $10,000 balance, 0.05% more in interest is $5. That's far too little to bother filling out an account application and transferring your money every time you see a slightly better deal.

Alternative: Review the best high-yield savings accounts and pick one that you like. Set up automatic transfers to that account every month. You'll build your savings, and you won't need to spend any more time than necessary in the process.

2. Spending hours shopping for deals on a one-time purchase

Everyone loves to get the lowest price and feel like they got the best deal possible. But now that we can shop for the same thing at hundreds of different sites, it's easy to overanalyze our options.

For example, you need a new laptop, so you look at every deal you can find on Amazon, Walmart, Costco, Best Buy, and so on. Or you're booking a flight for an upcoming vacation, and you go through every airline and travel site in search of the lowest rate.

With these one-time purchases, consider how much you're realistically going to save with hours of searching. You can most likely find a competitive price within 30 minutes to an hour. After that, you're wasting time in the hope that you might be able to save a small amount more.

Alternative: Use that time instead to go over your monthly budget and look for bills you can reduce or eliminate. You'll save a lot more in the long run by reducing your regular expenses.

3. Trying to get rich picking stocks

A disclaimer is in order here. If you're knowledgeable about investing, then picking individual stocks could be worth pursuing. And if you just like to do it, then there's nothing wrong with using a small portion of your portfolio (10% or less) on stock picking as a hobby.

It's extremely difficult to beat the market, though. If you were inspired by The Big Short or The Wolf of Wall Street and expect to trade your way to big bucks, you're setting yourself up for disappointment. Chances are that you'll lose a lot of time, money, or both.

Alternative: Take full advantage of retirement plans that help you both invest and save on taxes, including 401(k) plans and individual retirement accounts (IRAs). For investments in the stock market outside of your retirement plan, keep the bulk of your portfolio in index funds.

4. Using credit card rewards to justify overspending

Although rewards credit cards can be very valuable, they can also convince you to make poor spending choices. Let's say you're on the fence about a $300 purchase, such as a new handbag or TV. You know it doesn't work with your budget, but you'd love to buy it. A thought comes to your mind -- you would get 2% back by using your credit card, so maybe it's not a waste, after all.

Plenty of consumers justify overspending this way, and it's exactly what credit card companies want. Sure, you earn $6 back in the example above. You also spend $300. Even if you pay off your credit card bill in full to avoid interest, you're still down $294.

Alternative: Find ways to earn more credit card rewards on your normal expenses, such as combining multiple cards with different bonus categories or using your card issuer's shopping portal. Stick to your typical budget, and don't use rewards as an excuse to change your spending habits.

Making the right money moves

Many consumers, myself included, have made at least one of the mistakes above. If you've done the same, now is a good time to swap out those bad financial habits for more effective money moves.